For CUNA Mutual/Open Lending, Breaking Up Is Hard To Do

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CHICAGO – Eighteen months after the official termination of a joint venture between CUNA Mutual Group and Open Lending, Inc., to sell credit insurance on subprime auto loans, the two companies are still fighting over the terms of the break up.

Under the terms of the termination, Austin, Texas-based Open Lending agreed in September 2009 to buy out CUNA Mutual’s 50% interest in the venture, known as Lenders Protection LLC., which insured 70,000 auto loans at 170 credit unions. Last October, the venture replaced CUNA Mutual’s CUMIS unit as insurer for the credit losses with AmTrust Financial Services.

In a new lawsuit filed in federal court here, CUNA Mutual claims that Open Lending and its wholly owned Open Lending Services subsidiary refuse to participate in a contractual arbitration over the terms of the break up with its wholly owned Lenders Assurance Inc. subsidiary, which was the legal entity owning the joint venture share. CUNA Mutual claims in its suit that the companies still owe it $528,000, as well as liability on claims going forward related to the joint venture.

CUMIS filed a complaint and petition to compel arbitration to recover reinsurance funds that Open Lending’s captive reinsurer, Lenders Assurance, failed to pay under a reinsurance treaty with CUMIS.

The CMG suit claims that lawyers for Open Lending assert they are not responsible for the arbitration settlement.

“Now that there are losses and now that Open Lending has found a replacement for CUNA Mutual Group and CUMIS, Open Lending and Open Lending Services are unjustly using a corporate form that was never more than a regulatory conduit to avoid sharing in these losses,” claims the suit.

An official with Open Lending did not immediately return a phone call seeking comment on the suit.

A CUNA Mutual spokesman said, “we hope through this legal action we can resolve this situation in a fair manner for all parties.”

 

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